Landlord tips & tricks
January 27, 2023

Rental Property Insurance 101: A Guide to Landlord Insurance

Steadily's blog cover page for information around landlord insurance.

How to Find The Best Policy For Your Rental Properties

As a landlord, you need to make sure you have the right insurance to protect your property and income. There are so many choices that it can be hard to know where to start.

One important first step is to know how homeowner's insurance is different from landlord's insurance. Doing a thorough risk assessment is another important step in choosing the right insurance for your rental property. This includes figuring out what kinds of dangers and risks your property and the area it is in might pose. For example, homes in areas where there is a high risk of wildfires will need a different type of coverage than homes in areas where natural disasters are less likely to happen.

Once you know what kind of insurance you need and why, you should compare rates from different companies to make sure you're getting the best coverage for your money. Considering factors such as the total cost of your policy including the premium and deductible will help you can make an informed decision about the coverage that best meets your needs and budget.

Related Reading: 12 Most Landlord Friendly States

Difference Between Homeowners and Landlord Insurance

First, let's look at some statistics:

  • According to IProperty Management, 72% of apartments in the U.S. are insured by their landlords.
  • A survey done by the Insurance Information Institute found that 57% of landlords have a separate insurance policy for their rental properties.
  • The most common type of insurance claim for rental properties is for water damage, which accounts for 29% of claims.

Let's now examine the typical coverage provided by a landlord insurance policy. These policies, which are specifically designed for rental properties, safeguard both the structure itself and any personal goods provided to tenants. This kind of insurance covers liabilities, property damage, and other dangers that landlords may encounter.

On the other hand, homeowner's insurance is designed for properties where the owner resides. It is not designed for the unique hazards and requirements of rental properties, despite the fact that it can in certain respects assist in protecting landlords. For instance, homeowner's insurance may include restrictions on the amount of personal property coverage or may not cover damage caused by renters.

Coverage Homeowners Insurance Landlord Insurance
Property Damage Included Included
Liability Included Included
Personal Property Included Only for property provided for tenants' use
Loss of Rental Income Not Included Included
Additional Living Expenses Included Not Included
Medical Payments Included Not Included
Ordinance or Law Coverage Not Included Included

Note that this is an example of a comparison table, and that the coverage of homeowners insurance and landlord insurance can vary by state and by insurance company. It's important to carefully read the policy and talk to an insurance agent to understand what it covers and what it doesn't.

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    Assessing Property Risks

    So, how do you choose the best rental insurance? First, think about the risks and needs of each of your properties. Think about things like the age and condition of the buildings, the kind of tenants you have, and where the buildings are. Then, look at what different landlord insurance policies cover and how much they cover. Make sure to look for insurance policies that offer the right amount of protection for your needs and are sold by reputable insurance companies.

    Below is an example of simplified matrix of environmental risk for the state of Arizona.

    Low Risk Medium Risk High Risk
    Drought Adequate water supply Limited water supply Severe water scarcity
    Wildfires Low fire risk area Moderate fire risk area High fire risk area
    Desertification No evidence of degradation Limited degradation Extensive degradation
    Air pollution Low levels of pollution Moderate levels of pollution High levels of pollution

    This is just an example, and the real matrix for property insurance in Arizona may be different. Depending on certain areas and conditions in Arizona, the seriousness and likelihood of these environmental threats may change.

    There are many things to think about when investing in property. Use of third-party tools like Risk Factor is one way to do this. This kind of tool can help you evaluate uncertainties of your investment property by giving you detailed information on a wide range of risks. This includes weather data from the past, information about zoning, and even information about local building codes.

    Comparing Policies

    When comparing policies, it's also important to shop around and get quotes from multiple insurance companies. This will help you find the best deals and find the best rates. In short, as a landlord, it's important to have the right insurance in place to protect your property and income.

    Considering Premiums and Deductibles

    One of the most crucial considerations when purchasing insurance for a rental property is the cost. There are two components of the cost that must be taken into account: premiums and deductibles.

    Premiums: Your monthly payment for maintaining your insurance coverage is known as a premium. Your premium will vary depending on a number of factors, including the kind of coverage you select, the cost of your property, and the location of your property. Homes in locations vulnerable to calamities or crime, for instance, typically have higher insurance. The premium is typically paid once per month, three times per year, or once per year.

    Deductibles: Your deductible is the sum you must pay from your own pocket before your insurance policy takes effect. Suppose you have a $1,000 deductible and a $10,000 loss, you'll pay the first $1,000 and your insurance will cover the remaining amount. Choosing a high deductible will reduce your monthly insurance premium, but you'll have to bear a larger portion of the cost if you file a claim.

    Updating Your Rental Property Insurance Policy

    It's critical to regularly review your rental property insurance policy to ensure you have the appropriate level of protection. You should take the opportunity during a review to study your coverage options, assess how your needs have changed, and make any necessary modifications to your policy. For instance, you might need to increase your coverage if you just made alterations to your home in order to ensure that you are adequately insured.

    It's crucial to review your coverage and compare costs from several insurance providers when it's time to renew your rental property insurance. You might be able to reduce the cost of your insurance coverage through negotiation, or you might discover that your present policy has to be altered to better suit your needs.

    Knowing the difference between homeowner's insurance and landlord's insurance, doing a thorough risk assessment, and comparing policies from different insurance companies will get you the best insurance policy for your rental property. You will always have the right level of protection if you look at your policy often and make changes as needed.

    Table of Contents

    How to Find The Best Policy For Your Rental Properties

    Difference Between Homeowners and Landlord Insurance

    Assessing Property Risks

    Comparing Policies

    Considering Premiums and Deductibles

    Updating Your Rental Property Insurance Policy


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